Setting up a mortgage broker

SteveSilva

Once an individual has passed his Cemap 1,2,3, and is confident of seting up shop what exactly are the requirements they need to set up their own firm.
I work at an independent estate agents where the owner is willing to help financially with the business.
Can we pay a fee to the FSA and start operating. I understand a business like this will take time and hard work to succeed, how would I start?
How exactly do we go about offering products from the entire market, is that to do with the fee to the FSA or an agreement with lenders?
Thanks

dunstonh

There is more to it than that. You need to decide how you are going to set it up. i.e. sole trader/partnership/limited company. Then you need to decide if you are going to go directly authorised or use a network. Given your inexperience and lack of anyone to hold the supervisory role, then network is almost certainly a requirement.

You then need to find the right network to suit your requirements. Whilst investment classification network models have been around decades, there are lots of new mortgage networks, many of which will not survive the long term. Look for financial strength as if they go under, your renewals go with them. Also, be wary with networks as the recruitment agents all slag off the other networks and promote their own, often with misinformation. So, don't take anything at face value. Also, look at costs and look at value for money. The cheapest is not necessarily the best.

Once you have applied to the network, you will also need to apply for consumer credit licence and data protection licence. The FSA application goes via the network so they handle all that. I know that investment advisers cannot be inexperienced and own a firm without an experienced individual being involved. However, I dont know if that applies to mortgage and general insurance as well.

You will to go on a course with the network to show initial competency and pass a few more tests. Then you wait for your approvals to come through. The network should set a number of the agencies up with the providers although you may need to chase some of these and many will wait until the first application before creating an agency.

You will also need to put in place computers and software. Its best to start looking to work to a paperless office so you will need a document scanner and a computer filing system (I use paperport). Investment class advisers really need back office software as well. Whilst mortgage and general is covered in there as well, a mortgage adviser may not see the extra functions of back office software as being necessary. It certainly saves time and covers your compliance requirements but you may not have the money to afford it. You will however, need mortgage sourcing software and some method of research for general insurance.

As company owner, you will have to meet capital adequacy requirements as well. Currently that is only a £10k surplus on your assets and liabilies (assuming sole trader or partnership). That is likely to rise to 50k for firms taking commission and not fees as proposed by the FSA lask week. Limited companies need to have a surplus of 10k (rising to 50k) in their own right. If there are no assets in the limited company (which is likely to begin with) then that means holding £10k in the company bank account.

For mortgage only firms, some of the requirements are different so I will leave a lot of that to the mortgage only advisers here. They maybe able to clarify some of the differences for you.

SteveSilva

"I know that investment advisers cannot be inexperienced and own a firm without an experienced individual being involved. However, I dont know if that applies to mortgage and general insurance as well."

Maybe other brokers could answer that

thanks

luckyfool

I am under the impression that the capital adequacy requirements for "appointed representatives" of networks is different. The only requirement is that you have a positive net worth, ie that assets - liabilities or debts is greater than zero.

Not sure on the experience issue. If you are operating through a network again I think it is down to the network but unless you have experience you cannot advice apart from under supervision until you have gained competent status. You may find that networks will be willing to provide the enhanced supervision required to bring you up to competent status at a cost.

Cheers

SteveSilva

"there are lots of new mortgage networks, many of which will not survive the long term. Look for financial strength as if they go under, your renewals go with them. Also, be wary with networks as the recruitment agents all slag off the other networks and promote their own, often with misinformation. So, don't take anything at face value. Also, look at costs and look at value for money. The cheapest is not necessarily the best."




By networks I presume you mean mortgage broker franchises, I would be abit cautious to join one but it may be quite necessary, any reccomendations.

UK007BullDog

Networks are not franchises.

go here www.cherryplc.co.uk there you will find a list of all networks and their ratings by brokers.